Clear answers needed on Cyrus Mistry’s ouster
large conglomerates do not remove their chairmen willy-nilly; when the group in question is Tata Sons, by far and away India's most storied conglomerate with a rich history intertwined with modern Indian history, everyone sits up and takes notice. The removal of Cyrus Mistry as chairman of Tata Sons not only made headlines in India, but was the lead item on global newscasts. If for nothing else, this was a picture-perfect palace coup of the new king orchestrated by the old king, Ratan Naval Tata. Ratan Tata is not only famous as a doyen of the mercantile Parsi community, but is one of India’s most recognised personages. Indeed, he had ‘hand-selected’ Mistry as his successor as chairman of Tata Sons. Now, Mistry’s abrupt removal in a highly unnatural manner has rightly spooked investors — most Tata company shares paid the price on the bourses. We may never know the exact reasons as to why Mistry was ousted by Ratan Tata, but from news reports emerging, it appears that Tata, who still chairs the various Tata family trusts which control a majority of Tata Sons shares, was deeply unhappy with Mistry’s style of functioning.
While this could be a valid reason to remove someone at the helm of a company, some have begun to question as to what Cyrus Mistry had done wrong. Tata Sons companies had increased in value manifold in the nearly four years Cyrus Mistry was at the helm, growing by almost 75 per cent as against the 42 per cent increase in value of the benchmark Nifty index. Mistry had clearly begun to make his own mark at the conglomerate and had spoken of the tough road ahead. He had inherited some severe problems, not least of which were the issues surrounding Tata Steel in Europe and the ill-fated Tata Teleservices, which had been caught up in the 2G Spectrum scandal. Yet, Mistry had begun to resolve several issues in his own way, including divesting some of Tata Steel Europe’s steel assets as well making attempts to exit the telecom business. There was a clear attempt to reduce the huge debt burden that was stifling the group. Unfortunately, the telecom business was caught in an expensive and time-consuming arbitration battle with the Japanese partner, NTT-DoCoMo, which the Tatas lost. Yet, this case is still being fought out in the Delhi High Court, as the arbitration payout falls foul of Reserve Bank of India guidelines, according to Tata Sons lawyers. There is little doubt that this particular case has impacted the reputation of Tata Sons.
Much like when Ratan Tata took over from his uncle, the legendary JRD Tata, Mistry had taken on some entrenched practices and personalities in the group. Ratan Tata’s famous battle with his uncle’s right-hand man Russi Mody of Tata Steel is entrenched in Indian business legend. Did Mistry’s style of functioning chafe TataIJ If this indeed is the case, it seems almost petulant because, three decades ago, Ratan Tata was the newcomer and Mody the big boss. Cyrus Mistry was given just four years to prove his mettle. Right now, investors need clarity on what happened. Tata company shares are held by millions, and 2016 is not 1993. The economy has changed dramatically, as Ratan Tata knows well, since he was one of the architects of that change. There needs to be clear answers.